• Performance monitoring: Bridging profit & sustainability in real estate

    2 October 2024

    In today’s real estate landscape, the convergence of profitability and sustainability is reshaping the role of landlords. Understanding the role landlords play in shaping the environmental impact of buildings, we explore various initiatives that bridge profit and purpose.

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    Landlord Initiatives for Sustainability

    Sustainable leases serve as the foundation for environmentally conscious landlord-tenant relationships. These agreements go beyond conventional leases, incorporating provisions that align with sustainability goals. Landlords hold a significant position in steering sustainable practices within their properties.

    Certain fundamental aspects are often addressed in green leases. Landlords and tenants typically commit to setting and achieving specific energy performance, waste management, indoor air quality, and water conservation standards.

    To further demonstrate the commitment to sustainability, leases may include terms related to green building certifications like LEED and WELL. This is where landlords and tenants can collaborate to achieve and maintain these certifications.

    Performance Monitoring in Green Leases

    Building performance monitoring systems are becoming increasingly popular in green leases, and this is not without reason. Landlords who have already implemented such technologies note several benefits, including enhanced ability to meet sustainability goals, improved tenant satisfaction, and increased property value. Another advantage is the competitive aspect that arises when data can be compared from tenant to tenant. This comparison can foster a sense of healthy competition, encouraging tenants to adopt more sustainable practices to achieve better performance metrics.

    Their popularity is also supported by the fact that green building certification standards are starting to require such systems for their certifications.

    For example, the latest version of LEED, LEED v5, includes mandatory criteria of the implementation of real-time performance monitoring systems.

    Ongoing monitoring can significantly reduce energy use, conserve water, and improve air quality. These improvements can be demonstrated in measurable units like GHG emissions reduction or water savings. More importantly for many building owners, these improvements can also be represented in monetary terms.

    Tangible Achievements

    For instance, one of BEE’s distinctive customers, a luxury shopping village owner, has implemented our real-time performance monitoring system, BEE Sense, in the contract with its tenants. More than 119 luxury boutiques use it to monitor their energy spending and indoor air quality (IAQ). Additionally, 11 restaurants and food kiosks use water meters alongside energy and air monitoring.

    We have installed over 900 monitors across the commercial center, covering an impressive 175,000 square meters of area in Shanghai and Suzhou. These data points include energy monitors, water usage monitors, air quality meters, and water quality monitors. BEE Sense provides greater visibility into what’s working well, identifies areas for improvement, and promotes goal setting based on actual performance results.

    After a year of monitoring, the benefits became evident for both the landlord and tenants. This data-driven approach enabled our client to identify outliers in energy consumption and pinpoint specific areas of inefficiency. By comparing and benchmarking tenants’ performance, the building owner can craft a targeted action plan for further enhancements.

    Additionally, using the massive amount of data we received from the system, we developed a set of recommendations that led to significant savings: a 12% reduction in energy consumption, which is about 290 tons of CO2e, and significant improvements in water reuse. This is equivalent to approximately $15,000 in annual savings.

    Using our real-time monitoring technology, the client has increased all the sustainability indicators, continued to benchmark their performance, and improved their ratings. They achieved a 5-star rating in the Global Real Estate Sustainability Benchmark (GRESB) and an outstanding 90/100 score in the Building Research Establishment Environmental Assessment Method (BREEAM). Over three years of collaboration, they improved their benchmark score by 125%, ranking among the top three retail centers throughout Asia.

    Challenges and Solutions

    Implementing performance monitoring systems in green leases comes with challenges such as high initial costs, technical complexities, and tenant resistance to change. These barriers can be daunting, but effective solutions exist.

    The high initial cost can be mitigated through incentives and rebates from government programs aimed at promoting sustainability. Additionally, demonstrating the long-term cost savings and return on investment can help justify the upfront expenses. Clear and transparent reporting mechanisms, regular updates on energy efficiency improvements, and certification programs can help tenants track and understand the environmental impact of the property.

    Technical complexities can be addressed by partnering with experienced providers who offer comprehensive support, from installation to ongoing maintenance. This can also solve challenges related to accountability and measuring sustainability performance.

    Lastly, tenant resistance can be minimized through education and engagement. Providing clear communication about the benefits of monitoring systems, along with training sessions, can foster tenant buy-in. Open communication channels and collaboration between landlords and tenants are crucial for overcoming these concerns and fostering a successful transition to green leases.

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